Statutory Issue Paper No62R - Reinsurance Focus

Property and Casualty Reinsurance
SSAP No. 62R
Reinsurer/ Transferee
Day 1 - Cedent transfers 50k in reserves & 10k UPR for
60,000
Cash Asset ↑ 60,000
Reported Losses on Reins. Assumed (U&I Part 2A Liab ↑ 50,000
& Sch. P)
Unearned Premium Reserve (U&I Part 1& 1A) Liab ↑ 10,000
Assumed Premium Written (U&I Part 1B) I/S ↑ 10,000
Change In Reserves – Incurred Losses (U&I Part 2) I/S ↓ 50,000
Change in UPR (U&I Part 1& 1A) I/S ↓ 10,000
Losses Paid or Incurred (negative) (U&I Part 2
&Sch. P)
I/S ↑ 50,000
Day 180 – Premium is Fully Earned (Assumes 80% Loss
Ratio)
Unearned Premium Reserve (U&I Part 1& 1A) Liab ↓ 10,000
Reserves for Unpaid Losses (U&I Part 2A & Sch. P) Liab ↑ 8,000
Change In Reserves – Incurred Losses (U&I Part 2) I/S↓ 8,000
Change in UPR (U&I Part 1& 1A) I/S ↑ 10,000
To record the increase in unpaid losses by the transferee
Day 360 - Negative Development on Transferred Business
-3,000:
Change In Reserves – Incurred Losses (U&I Part 2) I/S↓ 3,000
Reserves for Unpaid Losses (U&I Part 2A & Sch. P) Liab ↑ 3,000
Day 540 – Reinsurer Pays the Loss @ Reported Reserves
(50+8+3)
Reserves for Unpaid Losses (U&I Part 2A & Sch. P) Liab ↓ 61,000
Cash Asset ↓ 61,000
Comments:
In this second example, the portion of the runoff business that has an UPR associated with it is
essentially booked as prospective reinsurance. Other elements of the example are the same except
that we assumed an 80% loss ratio on the unearned portion of the business.
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© 2009 National Association of Insurance Commissioners 62-39